Savvy businesses embrace weak economy

Their mission: Find ways to take advantage of the weak national economy.

“One of the major advantages we have in having an 89-year-old CEO is he has been through every conceivable economic downturn and challenge known to mankind,” said Scott Tarwater, senior vice president of development for John Q. Hammons Hotels & Resorts. “He doesn’t look at it emotionally. He looks at it in pure business form.”

While business challenges clearly exist during economic downturns, so do opportunities, Tarwater said. For Hammons Hotels, demands from individual business travelers and tourists have decreased, but the company has successfully “turned up” its convention business, which Tarwater said is less affected by economic woes. As a result, companywide occupancy rates have maintained a 70 percent clip, he said.

The real advantage for Hammons Hotels, though, comes in developing new properties. The Springfield-based company has 76 properties in 40 states, but it has another $565 million under construction and $1.5 billion in the pipeline, Tarwater said.

It’s not yet known if the United States is in a recession this year, but if it is, Hammons Hotels will accelerate through the trough, just as it did during the recession that hit following the terrorist attacks in September 2001. From 2001–06, Hammons Hotels built 16 properties for the price of 14 properties, saving an estimated $82 million on labor and materials during a period when overall demand for those items fell off, Tarwater said.

Tarwater said Hammons’ response was priceless: “‘There you go boys. We have now two free hotels,’” Tarwater recalled Hammons saying afterwards.

Sam Coryell Sr. is building 800 apartments at 16 sites through his TLC Properties. This year, he’ll increase his existing 2,000-unit inventory by 40 percent.

“We do get a little bump,” Coryell said of the business opportunities created for apartment owners when single-family home prices and foreclosures increase.

Coryell, however, contended, “The economy is not weak, not in Springfield, Missouri,” pointing to the unemployment rate.

The nonseasonally adjusted rate in January for the Springfield metropolitan statistical area was 4.5 percent, according to the U.S. Bureau of Labor Statistics’ latest figures. The January report showed national unemployment at 5.4 percent, up from 5 percent a year earlier.

Coryell blamed risky lending practices for creating housing troubles. Bob Hammerschmidt, regional president of Commerce Bank, said those risky practices within the financial industry, such as subprime lending, have benefited Commerce Bank.

“We’ve not been affected by the real estate downturn at all because we’ve always asked a basic question,” Hammerschmidt said. “And that’s, ‘How can a loan be paid back?’”

Hammerschmidt said Commerce Bank’s conservative approach has attracted customers tired of banks that are changing behaviors in the wake of the subprime meltdown.

“When you’re a bank and you’re not doing the same old things the same old way, then a lot of times that will shake customers loose,” he said.

Further proof of opportunities during a weak economy is Lockwood-based S&H Farm Supply Inc., which is doubling this year to four stores with additions in Joplin and Mountain Grove. S&H co-owner Eric Schnelle expects equipment sales to be strong with low interest rates and the economic stimulus package President Bush signed into law in February. Neither the low interest rates nor the economic stimulus package would exist without the weak economy.

Two business incentives in the economic stimulus package – one adding temporary bonus depreciation on newly purchased property and the other doubling the amount to $250,000 that can be deducted from taxable income for qualified expenses – is spurring his farm customers to update their work equipment.

“People needing things are willing to buy equipment the same or better than last year,” Schnelle said. “It’s time to look at updating equipment.”

Personal opportunities exist, too

Financial advisers say opportunities exist in personal investing during a weak economy, too. The key: Hold steady.

Jeff Layman, chief investment officer for BKD Wealth Advisors, said diversification, shifting investments to larger companies with an international presence and taking advantage of depressed market prices can benefit investors, even during a recession. BKD Wealth Advisors manages $1.5 billion in direct investments.

“When it feels the worst is not the time to be selling the stocks from your portfolio,” he said. “In fact, it’s just the opposite. Historically, those represent some of the best opportunities to invest.”

BancorpSouth financial adviser Nadia Cavner, who oversees a portfolio of $362 million, also champions diversification during weak economic times. She, too, said downturns are great times to buy bargain stocks.

“Kind of look at it like things being for sale,” she said.[[In-content Ad]]